Practical Strategies to Attract Economic Development

Daniel Spiess Economic Development Partnership Northeastern University

National League of Cities First Tier Suburbs Council Steering Committee Garland, Texas June 12, 2010

Fundamental Proposition

Cities and towns have the ability to create their own destiny, but they can benefit from having sophisticated partners who can help them develop tools and information to compete successfully.

Deal Breakers City Self-Assessment City Action Deal Makers

Deal Breakers/Deal Makers

Cities often fail to adequately understand how the global economy is changing Cities often suffer from widespread misperceptions about their strengths and weaknesses What

attracts

investment to your city may be different than what you think What

hinders

investment in your city may be different than what you think

Deal Breaker #1

Due to rapidly changing market conditions in the global economy, municipal leaders often lack complete, up-to-date information regarding the specific location needs of industry and the recruitment efforts of competing locations. As a result, they are not always fully prepared to assist firms in a timely and effective manner, helping to overcome obstacles to investment and job creation .

“When I have to send a manager overseas for six weeks, and they drink bottled water and eat peanut butter crackers they bring from home they don’t like it. If I offered to send them to Chelsea, Holyoke, or Lawrence, they’d take it in a minute.” -- Massachusetts IT executive

Deal Maker/Action Steps

The Economic Development Partnership has created a powerful self assessment tool for cities to better clarify their economic development goals and identify their competitive strengths and weaknesses relative to other urban locations. Through the Economic Development Self-Assessment Tool (EDSAT) , cities now have access to the best thinking of private sector site location specialists to undertake an internal review of all aspects of their own community’s development process.

The Economic Development Partnership is also able to provide ongoing economic development training for municipal leaders and managers that focuses on how to respond to opportunities in various industrial sectors.

Deal Breaker #2

Business decision makers have well-defined “cognitive maps” – perceptions or expectations - about the attributes and opportunities of particular cities that can adversely affect the way they think about locating in these urban settings.

“We were in Lawrence when it was the arson capital of the U.S. For a while, being there meant that we couldn’t always recruit our first choice for a position. However, we don’t have that trouble any longer. Lawrence is coming back.”

Deal Maker/Action Steps

EDSAT assists city officials in combining resources to better market their communities and respond to inquiries from firms, developers, and location specialists.

EDSAT assists cities in making their websites more attractive to business by providing the information that businesses need to know in order to make rational decisions about locations.

Deal Breaker #3

Specific urban site deficiencies can add excessive costs to doing business in particular cities.

“The mills were built when people walked to work. There is no parking and no room to create it.”

Deal Maker/Action Steps

Encourage the enactment of urban overlay zoning districts where there can be flexible use, expedited permitting, focused public safety efforts, and amenity packages essential to creating competitive advantage in an urban setting.

Specialized Industrial Cluster Focus Expedited Permitting Mixed Use Development Transit Connections Priority Infrastructure High Performing Schools

Urban Overlay District

Housing Public Safety Operations Strategic Workforce Investment Leveraged Public/Private Investment

Deal Maker/Action Steps

Make changes in the brownfields regulatory program to facilitate re-use of urban sites to facilitate faster clean up and further limit liability.

Change state rules overseeing municipal property taxation that force new owners to pay delinquent taxes of previous owners.

Deal Breaker #4

State and local review processes can add excessive costs to doing business in older industrial cities.

“Once a product has passed its Phase III trials, we want to get the new product into production before another company does. Speed is so critical that we start building the production facility before the product is approved. “ – Biotech Executive

Deal Maker/Action Steps

Identify market ready sites and have them pre-permitted services, and other commercial site services.

for industrial and commercial uses. The marketing of pre-permitted urban parcels can be done through city web sites, site finder Empower someone in the administration to specifically oversee the development process and respond aggressively and proactively to the needs of firms considering the city as a site for location.

Create a permit system that allows for a single presentation of a development proposal to all boards stage of the review process. with jurisdiction in the city and establish a specific time frame for community response in the initial

Deal Breaker #5

Traditional public sector financial tools such as tax abatements, tax credits, and subsidies, while often strategically important as a deal closer, are not sufficient to attract high value business investment if previous deal breakers are not overcome. “From our perspective, time is money. We may actually be able to make a deal work more effectively if we can receive expedited permits and infrastructure enhancements, than by factoring in a tax subsidy into our pro forma.” – Developer

Deal Maker/Action Steps

Use the Tax Increment Financing program to create revenue streams for critical infrastructure in urban locations.

Site state and municipal facilities in urban locations to stimulate creation of amenities and other attractions to spur private sector commercial and industrial investment.

Lead Actors

State Governments City Governments Regional Agencies Business Vocational/Technical Schools, Community Colleges, Universities

The Local Economic Development Self-Assessment Process

We surveyed corporate real estate and development professionals on location decisions: NAIOP (National and Massachusetts Chapter) CoreNet Global Based on the NAIOP/CoreNet survey the Economic Development Self-Assessment Tool (EDSAT) for Municipal Leaders was created

Sample

Project type selected Geographic area in which do most of work ** NAIOP

General Industrial Commercial / Profess.

Mixed-use R& D Facility Retail Manufacturing 40.0% 38.8% 8.8% 5.0% 5.0% 2.5% Pacific 18.9% Middle Atlantic 18.9% South Atlantic 18.9% East North Central 8.8% International East South Central West North Central New England West South Central Mountain 7.6% 6.3% 6.3% 5.0% 5.0% 3.8%

CoreNet

Office / Headquarters* Manufacturing Retail Mixed-use R&D Facility Distribution / Warehouse* 68.5% 10.4% 10.4% 5.7% 2.8% 1.9% International Pacific Middle Atlantic West South Central East North Central South Atlantic New England West North Central East South Central Mountain 38.3% 32.7% 28.0% 21.4% 20.5% 19.6% 19.6% 15.8% 15.8% 11.2%

NAIOP/CoreNet Survey Categories

Permitting Processes Labor Development and Operating Costs Business Environment Transportation and Access Quality of Life/Social Environment

Which location factors received the highest scores?

On-site parking Rental rates Availability of appropriate labor Timeliness of approvals and appeals

Which location factors received the lowest scores?

Municipal minimum wage law Access to rail Strong trade unions

Survey Results Mean Scores for All Factors (1 = Very Important; 4= Unimportant) Factor Onsite parking for employees Rental rates Availability of appropriate labor Access to airports / major highways* Timeliness of approvals / appeals Quality / capacity of infrastructure Competitive labor costs Traffic congestion Property taxes State tax / financial incentives** Crime rate in the area Fast track / concurrent permitting Access to major highways** Local tax / financial incentives Land costs Predictability / clarity of permitting Undesirable abutting land use Physical attractiveness of area State tax rates** Municipal rep. as good place to work Mean 1.51

1.55

1.57

1.63* 1.70

1.75

1.78

1.79

1.83

1.83** 1.84

1.84

1.85** 1.87

1.87

1.88

1.89

1.95

1.96

1.97

Factor Municipal rep. as good place to live Municipal rep. for economic dev.

Zoning by right Proximity to restaurants / shops Public transportation Cost of housing for employees Complementary business svcs** Critical mass of similar firms Access to airports** Quality of local schools Awareness of brownfields Permitting ombudsman Awareness of strong neighborhood orgs Customized workforce training Availability of sports/cultural/recreational opps Proximity to research/universities Informative municipal website Strong trade unions Access to railroads** Municipal minimum wage law Mean 2.03

2.03

2.09

2.10

2.15

2.15

2.16

2.20

2.21

2.21

2.24

2.32

2.37

2.49

2.62

2.66

2.75

2.82

2.84

3.00

* Question asked in NAIOP survey only. **Question asked in CoreNet survey only.

When asked what they thought was most critical, what did location specialists tell us?

Proximity to major highways, airports, and transportation routes Rents, land costs, and lease costs Availability of appropriate labor pool Permitting, approvals, and appeals processes Amenities and services nearby Pro-business/development friendly city …consistent with our survey results

The Self-Assessment Tool (EDSAT )

The self-assessment tool includes sections on:

1. Access to Customers/Markets 2. Agglomeration 3. Cost of Land (Implicit/Explicit) 4. Labor 5. Municipal Process 6. Quality of Life (Community) 7. Quality of Life (Site) 8. Business Incentives 9. Tax Rates 10.Access to Information

What the Tool Does

The tool helps local officials understand: • • The true “deal breakers” How they should prioritize their activities Data from all the municipalities included in the assessment tool make it possible for individual communities to compare themselves to other communities permitting them to determine how well they are meeting their own economic development goals. The act of measurement assists officials in paying greater attention to the critical deal breakers and deal makers, pinpoints municipal agency weaknesses that are deal breakers, and provides added leverage in dealing with real development barriers.

The Framework for the Tool

• City officials and staff working together answer over 200 questions in 10 categories • The results of the Self-Assessment Tool are secure and provided only to the local officials. Each community can choose to share the results at their own discretion • The results provide an ability to ascertain a community’s economic development strengths, weaknesses, opportunities and threats

Interpreting the Results

• The community’s results are color-coded to provide rapid analysis of how they are doing relative to peer communities • For each Self-Assessment Tool section, the results are interpreted in terms of what development and location specialists consider most important, somewhat important, and less important to attracting investment and jobs

EDSAT Testimonials

What folks are saying

"This is a great roadmap for the essentials for bench-marking our city's economic development policy." Jay Ash, City Manager, Chelsea, MA "It [taking the self-assessment] was a good learning experience for the employees in this town. We plan to hire a consultant [to help with development for the town], so the results from the self assessment will be good baseline data to share with the consultant." Anthony Fields, Planning Director, Burlington, MA "We have a new administration coming in, so it will be really helpful to be able to take all of this information we've rounded up for the self-assessment and hand it over to them." Steven Magoon, Chief Administrative Officer, Gloucester, MA

“The Partnership has provided me with the knowledge and assistance I need to understand and respond to the rapidly changing economic environment and to be an effective leader for economic development in my city." James Mitchell, Council Member, Charlotte, NC and 1

st Vice President, National League of Cities

"I'm using this as a guidebook for re-tooling our development process." Mayor Charles Ryan, Springfield, MA "We want the mayor to use this data [from the self-assessment] as a selling tool to get firms to come to our town....I think there's real value in being able to hand this information to a firm that might be interested in our town. It's been a great exercise for Norwood and we're just beginning to explore what changes we can make a result." Steve Costello, Town Planner, Norwood, MA

A Brief Test Drive of EDSAT

Sample Questions & Results

Sample Question 1

What is the prevailing average hourly wage rate for mid-level clerical workers?

 $6.50 or less  $6.51-$7.50  $7.51-$12.50  $12.51-$20  $20+

Sample Question 2

Do labor unions have a significant presence in the labor market of your jurisdiction?  Very much  Somewhat  Not at all

Sample Question 3

How many major public or private four-year colleges or universities are within 10 miles of your jurisdiction?

 0  1-3  4+

Sample Question 4

Does your jurisdiction use the existing Tax Increment Financing (TIF) or other programs to provide tax breaks to businesses?  Yes  No

Sample Question 5

What is the tax rate on industrial/commercial property per $1,000 valuation?

 $ 0- 10.00

 $ 10.01 – 20.00

 $ 20.01 – 35.00

 $ 35.00 +

Sample Question 6

The closest major/international airport is how many miles away?  0-5 miles  6-10 miles  11-20 miles  20-30 miles  31+ miles

Sample Question 7

What proportion of existing development sites within your jurisdiction have the following within 1 mile? a. Fast food restaurant  All  Most  Some  Few  None

Sample Question 8

What percentage of available sites for general office space have on-site parking?  0%  1-25%  26-49%  50-74%  75%+

Sample Question 9

What percentage of available sites are within 2 miles of an entrance or exit to a limited access major highway?  0%  1-25%  26-49%  50-74%  75%+

Sample Question 10 What is the average time (in weeks) from application to completion of the review process for the following? Building permit

 0-4  5-8  9-12  13-24  25-36  36+

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Customized EDSAT Reports

In a typical report you will find: (a) A summary of responses to the self-assessment questionnaire (b) A peer analysis that highlights how responses compare to those from all other cities that have participated in the Economic Development Partnership (c) Insights and comments from the Dukakis Center staff to help you think about these issues in a concrete, actionable way (d) A ranking system noting which issues are more important to the development community

We hope that your community will join in the Economic Development Partnership and participate in the EDSAT program Thank you Barry Bluestone Marc Horne Heather Seligman Daniel Spiess Nancy Lee

617-373-7870 www.economicdevelopment.neu.edu